On the other hand, consumer-discretionary stocks face both short-term and long-term challenges, according to Subramanian. First, they tend to not do well in periods of rising interest rates like the one everyone is bracing for next year. Over the long term, the aging Baby Boomers will not be spending as much on consumer goods, except for some select areas such as cruise ships, anti-aging cosmetics, pharmacies and home-improvement stores, according to the report.
The net result should be positive for the U.S. stock market, according to Subramanian. As Baby Boomers face longer lifespans to fund, individuals and pensions may turn more of their investment allocation to the S&P 500 because it “offers an optimal combination of capital appreciation, competitive income and inflation protection.”
That’s a good thing, since many of them may need to fix up the basement for their millennial kids and grandkids.